Three largest banks expect slower loan growth next year

Tighter liquidity and continuing high interest rates will dampen the performance of the country's banking sector next year, with the three largest banks forecasting a reduced rate of growth in lending.

Bank Mandiri, the largest bank by assets, said Tuesday it expects lending to grow by less than the forecast 18 percent growth this year, director Pahala Mansyuri said Tuesday.

"Growth in loans next year will not be as high as in 2008."

As of September this year, the bank posted a 33.7 percent growth in lending during the first three quarters, up from Rp 121.7 trillion in September 2007 to Rp 162.8 trillion.

Meanwhile, the gross rate of non-performing loans (NPLs) increased to 4.44 percent, just below the central bank's compliance level of 5 percent.

Despite that, Mandiri managed to post a net profit of Rp 3.96 trillion, up by Rp 776 billion from September 2007.

Mandiri vice president director Wayan Agus Mertayasa said the profit was the result of an improvement in net interest margin (NIM), a rise in fee based income and an improvement in the quality of productive assets.

For next year, Pahala said that despite Mandiri channeling some 13 percent of its loans to the plantation sector, which had now suffered significant losses as commodity prices had gone down, the NPL rate would not be likely to rise.

"We have not seen any signs that the declining commodity prices will affect our debtors' (ability to pay their loans)."

While the global credit crunch has greatly affected the liquidity situation, the banking sector is facing an even tougher challenge as the central bank has kept the benchmark interest rate fairly high at 9.5 percent to help defend the slumping rupiah.

Bank Central Asia (BCA), the second largest bank, forecast an even lower lending growth rate of between 10 percent and 15 percent next year, although it recorded a 53.3 percent growth in lending as of the third quarter of this year.

The rate of net NPLs, meanwhile, was significantly low, at only 0.6 percent.

Vice president Jahja Setiaatmadja said bank loans were 10.9 percent channeled to the telecommunications sector, 6.6 percent to consumer goods producers and 5.6 percent to the construction sector.

Meanwhile, Bank Rakyat Indonesia (BRI) -- third largest bank, forecast lending would probably grow by between 15 percent and 20 percent in 2009.

As of September this year, by contrast, BRI lending grew by 43.49 percent compared to the same period in 2007. BRI loans rose Rp 45.90 trillion from Rp 105.55 trillion in September 2007 to Rp 151.46 trillion in September 2008.

BRI director Sulaeman Ariyanto said the bank would still prioritize lending to micro, small and medium sized enterprises next year, while monitoring the cash flow from debtors more intensively to avoid bad loans.

taken from: the jakarta post